Debt financings in Canada heated up in the third quarter of 2006 to the second highest on record at $45.7 billion, an increase of 20.8% quarter-over-quarter and 23.2% year-over-year, according to an analysis released today by the Investment Industry Association of Canada (IIAC).

While debt issuance sizzled, trading was more tepid at $1.5 trillion in the third quarter, down 24.9% quarter-over-quarter and 3.3% year-over-year,

“It’s going to be another red-hot year for the debt market,” said Ian Russell, president and CEO of the IIAC, “Solid fundamentals, relatively low interest rates and the proliferation in Maple bonds have helped ignite Canada’s growing corporate market. We’re going to see that continue into 2007.”

The solid third quarter followed a strong first half for the debt market. In the first nine months of 2006, total debt trading was $5.1 trillion, up 15.7% from the same period a year ago while debt financings, at $127.8 billion for the first three quarters, were up a more modest 8.3%. Canada’s debt market in 2006 will likely break the financing record of $165 billion in 2004 and trading high of $5.9 trillion in 2005.

Looking out, the Canadian debt market is not expected to cool down significantly from the record levels in 2006. While the search for higher yields in foreign markets and widening credit spreads are growing concerns in 2007, there is enough positive momentum in the market that should help offset these negatives.